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The Right Renewable Energy Contract Mechanism

This article discusses the goal of promoting renewable generation in the US, the major problems faced in the renewable energy market, and the need for a long-term renewable generation contract trading market. It presents a solution in the form of a long-term renewable contract that aligns the interests of investors and consumers, providing lower cost of capital and electricity rates. The article also explores the challenges of providing long-term certainty and the types of long-term contracts available to regulators. It emphasizes the importance of incorporating flexible volume management, market-based subsidy rates, and auction mechanisms into the renewable contract. The role of administrative organizations in coordinating with policymakers, structuring contracts for institutional investors, and utilizing resource planning models and simulations is also discussed.

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The Right Renewable Energy Contract Mechanism

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  1. The Right Renewable Energy Contract Mechanism Keeping Rates Low By Aligning The Interests Of Investors And Consumers Aaron Rothschild November 14, 2011

  2. What Is the Goal of Promoting Renewable Generation In the U.S.? It’s not just about providing renewable generation as cheaply as possible to consumers It’s also about promoting the economy, energy security and innovation

  3. What Are The Major Problems? Pricing subsidies Offering investors a long-term subsidy price schedule Lack of developed long-term renewable generation contract trading market

  4. What Do Conflicting Policy Goals Mean? Keeping rates as low as possible is more complicated, but no less important And there is plenty we can do I will present a long-term renewable contract that would provide the win/win for investors and consumers we are looking for

  5. What Do Investors Want? Long-term certainty Eligible Technology (Solar, Wind…) Volume Cap (Energy, Capacity…) Subsidy Size ($ kWh and/or RECs…) Location (State, Utility, Corn Field…)

  6. Benefits of Providing Investors What They Are Looking For Lower cost of capital Lower electricity rates

  7. Risk of Over Emphasizing Investors Exorbitant profits at the expense of consumers

  8. The Challenge of Providing Long-Term Certainty It is difficult to impossible know how technological advancement will affect the cost The option to change policy goals can become expensive if too many long-term contracts are in place

  9. Types Of Long-Term Contracts Available To Regulators Feed-in Tariffs (FITs) for general offerings Power Purchase Agreements (PPAs) for project specific contracts

  10. Components Of Long-Term Contracts Pricing Volume (Energy & Capacity) Technology Preference Location (Generation & Transmission)

  11. Options For Pricing Regulator Sets Price for FIT or PPA Market-Based - On-Going Market-Based - Long-Term Fixed Price Market-Based - Long-Term Fixed Price Contract That Does Not Start For 5 years + After Auction

  12. Regulator sets price

  13. Market-based subsidy rates

  14. Market-based long-term contracts

  15. The Most Effective Long-Term Renewable Contract

  16. There is More Than Pricing Flexible Volume Management Builds Into Contract Auction Mechanism Market-Based Least-Cost Zones Incorporated Into Auction Mechanism Geographical Flexibility of Long-Term Contract Price for Energy/Capacity Contract

  17. Role Of Administrative Organization Coordinating with Policy Makers Translating Policy Objectives Into Auction and Technical Requirements Running Auction Structuring Contracts For Institutional Investors, Including Credit Rating and Contract Market Resource Planning Model and Simulation

  18. Aaron Rothschild (203) 894 1028 aaron@rothschildfinancial.com www.rothschildfinancial.com

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